Fixed vs Variable During a Trade War

When countries start throwing around tariffs — basically extra taxes on stuff coming into the country — things get chaotic fast. Right now, the U.S. keeps announcing new tariffs, and every time they do, the economy reacts like a toddler running with scissors: unpredictable and a bit messy. Because of all this back-and-forth, it’s much harder than usual to guess where interest rates are heading.

That’s why so many Canadians are asking the same question: Should I pick a fixed mortgage or a variable one in times like these?

What You Need to Know About VARIABLE Rates

Why Variable Might Go Down

The Bank of Canada sets a rate that affects variable mortgages.
They usually lower rates when the economy is getting weaker.
Tariffs from the U.S. make things harder for businesses → economy slows → Bank of Canada likely cuts rates.
The Bank of Canada’s rate is 2.75% now. They consider 2% “stimulating” the economy. They’ve cut to 2% or below in every past slowdown.
A ton of Canadians are renewing mortgages this year at higher rates. The Bank of Canada wants to soften that pain. More reason to cut.

Why Variable Could Still Go Up

Inflation could get messy.
If things get too expensive too fast, the Bank might raise rates a bit.

Variable Rate – Pros

If rates drop, your rate drops right away → lower payments.
Usually cheaper penalties if you need to break your mortgage (3 months’ interest).
You can switch to fixed anytime for free.
Good during weak economies (and things look weak).

Variable Rate – Cons

Your payment can go up if rates rise.
Variable rates start higher right now than fixed rates.
When you switch (“convert”) to fixed, banks don’t give you their best deals.
Discounts on variable rates usually get worse when you move homes (porting).

What You Need to Know About FIXED Rates

Why People Like Fixed Right Now

It’s steady. Your payments don’t change.
In a crazy world (tariffs, politics, inflation), fixed = mental peace.
Fixed rates right now are lower than they were a few months ago.
They’re also lower than today’s variable starting rates.
Good for first-time buyers who need predictable payments.

Best Fixed Terms Right Now

3 to 5 years (they’re all priced about the same).
1–2 year fixed terms are more expensive — not worth it for most people.

Fixed Rate – Pros

You know exactly what you’ll pay every month.
Rates have already dropped from their highs.
Starting lower than variable right now.
Easier to qualify for.
Fixed doesn’t change when you move homes (porting).

Fixed Rate – Cons

If rates fall later, you don’t benefit until your term ends.
Penalties to break a fixed mortgage can be massive (way bigger than variable).
You cannot switch to variable later.

So Which Should You Pick? (The Bottom Line)

Choose VARIABLE if:

You believe rates will drop (and many signs point that way).
You want flexibility or might break your mortgage early.
You’re comfortable with payments moving a bit.

Choose FIXED if:

You want a guaranteed payment every month.
You don’t want surprises.
You like sleeping at night.
You want the lower starting rate.

Quickest Summary Possible

Fixed = safe and calm. Rates are decent.
Variable = more risk, but more reward if rates drop.
The world is chaos right now → both choices are fine.
Pick what helps you sleep at night … or what saves you the most money, depending on your vibe.